When 'managerial control' of IBP means something else

Vol 5, PW 7 (23 May 01) People & Policy

Don't expect Indian authorities to let go of IBP Petroleum without adequate safeguards to ensure they have a say in the company's future.

A C.I.

M ('Confidential Information Memorandum') sent in late April to potential bidders, along with the first draft of the 'Shareholder Agreement' and 'Share Purchase Agreement', contains a schedule of more than 20 items where the government intends to retain the power of veto. These include safeguards against asset stripping, changing the line of business, procurement of unnecessary loans, premature sale and employee dismissal.

"We fully intend to put our strategic partner in the driving seat and let him run the business," reveals a 'hands-on' source linked to the IBP disinvestment. "But we won't sit idly by if he messes up the company.

If he wants to make a decision on these issues, he'll need my permission." With a 26% stake, the Indian government will be the second largest shareholder after the 'strategic partner', who will hold 33.59% and have "managerial control". Our source fully expects a raft of queries, questions and objections over the government's veto powers from the 13 companies that on 28th February submitted an 'Expression of Interest'.

"We might have to go to cabinet to get some of the answers," he adds. "This might take time."